Verizon finally announced their Software Defined Networking (SDN) roadmap yesterday, and while they may be playing catchup to AT&T on SDN,? it’s a shot across the bow for IT vendors as well as their channel marketing teams. In embracing SDN Verizon, like AT&T, has made it clear that they no longer view hardware as strategic, but as a commodity upon which they intend to build value for their customers.
In layman’s terms, Verizon is basically telling IT hardware vendors that their vision of the future is one in which they’ll no longer be paying big bucks for BMWs, but will be buying Hyundais and Hondas from many vendors and making them compete on price, while Verizon dresses them up with their own solutions.
“What we are doing right now and have been doing for some time is working on decomposing all of what we have loosely categorized as the monolithic hardware and software offerings — deconstructing those and figuring out how we get into software as a primary delivery mechanism,” he says. Verizon will not be using any end-to-end vendor ecosystems, he adds.
Why does this matter? Many IT vendors like Cisco, Juniper and Brocade to name a few, make the lion’s share of their revenue from big carriers like Verizon and AT&T. As more computing moves to the cloud, these carriers have been slashing hardware investments and focusing more on SDN. AT&T alone cut $18B from their hardware budget this year. That means huge losses for IT vendors, and huge pressure to make up those losses with new sources of revenue. But where?
Everyone in the channel, from vendors to VARs, from distributors to service providers, is looking to build future revenue on selling solutions. It’s not just about selling equipment anymore, but selling the business value that comes from leveraging IT effectively. Hospitals, for example, don’t want networks, they want HIPAA-compliant medical image storage for all their massive CT scan files. Financial firms don’t want networks, they want secure trading systems that can execute high-speed trading.
The challenge for vendors is that everyone is making a land grab for these solutions, and vendors are the furthest away from most of the customers who are buying. Not only do they lack the customer intimacy for many of the markets they need to develop, these markets are highly fragmented across many industries, requiring more complex engagement than what they’ve traditionally had to deal with selling huge deals to big carriers. That puts more emphasis on enabling partners to sell solutions, and more strategic pressure on channel marketing teams to identify and enable partners who can sell solutions effectively.
In theory, none of this is news to IT vendors who have been paying attention to market disruption from cloud migration. In practice, it’s a major shot across the bow for channel marketing teams still treating canned email campaign enablement for partners as some kind of leading-edge innovation that partners should be lining up to execute.